Inside and Outside Money, with an Application to the Russian Virtual Economy
AbstractWe analyze the endogenous appearance of money substitutes, their interaction with outside money, and resulting distortions in the price system of an economy with large monopolies and wide-spread informal networks. The economy consists of productive, individually optimizing agents and less productive colluding agents who issue universally acceptable money substitutes. We distinguish equilibria by types of exchange both between agents of one type and between those of different types and show that for small trading frictions, only three types of equilibria can be sustained. A novelty of the analysis is that the agents issuing money substitutes survive by their collusion.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0405009.
Length: 22 pages
Date of creation: 11 May 2004
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money substitutes; search; collusion; trading frictions.;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-CIS-2004-05-26 (Confederation of Independent States)
- NEP-EEC-2004-05-16 (European Economics)
- NEP-MON-2004-05-16 (Monetary Economics)
- NEP-TRA-2004-05-26 (Transition Economics)
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